Understanding how to calculate the value of an employee’s unused annual leave in Rand can be confusing for some employers. This can often lead to disputes when an employee leaves the company. The calculations and examples below are based on the Basic Conditions of Employment Act.
Accrual of annual leave for employees working 5 days per week
These employees should get 15 working days of annual leave, which adds up at 1.25 days per month.
Accrual of annual leave for employees working 6 days per week
These employees should get 18 working days of annual leave, which adds up at 1.5 days per month.
Once you know how much unused annual leave an employee has, the next step is to work out its value in Rand.
Daily wage calculation for an employee working a 5-day work week
Example: If the employee’s salary is R 5,000.00 per month:
- Calculate the weekly wage: Divide R 5,000.00 by 4.333 (the average number of weeks in a month). This equals R 1,153.93.
- Calculate the daily wage: Divide the weekly wage (R 1,153.93) by 5 (the number of working days in a week). This equals R 230.79.
So, if an employee with a full 15 days of leave leaves the company, they would be paid R 3,461.85 for their unused leave (15 days x R 230.79).
Daily wage calculation for an employee working a 6-day work week
Example: If the employee’s salary is R 5,000.00 per month:
- Calculate the weekly wage: Divide R 5,000.00 by 4.333. This equals R 1,153.93.
- Calculate the daily wage: Divide the weekly wage (R 1,153.93) by 6 (the number of working days in a week). This equals R 192.32.
So, if an employee with a full 18 days of leave leaves the company, they would be paid R 3,461.76 for their unused leave (18 days x R 192.32).
Calculating the hourly rate
Employers can also calculate the hourly rate by dividing the weekly wage by the number of ordinary working hours per week, usually 45 hours. This can vary by sector or can be adjusted in an employment contract or collective agreement.
Keep in mind that these calculations may differ by a few cents due to rounding. These methods are helpful for calculating outstanding annual leave for settlements, severance packages, or other terminations, especially when a payroll system is not available.
Feeling overwhelmed with Labour Law issues in your business? We’ve got your back. Let SEESA guide you to peace of mind. Call us at 080 001 1130 or visit www.seesa.co.za and we will reach out to you.
Author
Dyllan Jankielsohn is a
Provincial Sales Manager
LLB degree